Conventionally, in facilities revenue bond financing, bonds issued to finance the construction or renovation of facilities, for example, airport terminal facilities, have been either of two types: (1) bonds supported by the revenues of the airport commonly referred to as General Airport Revenue Bonds or “GARBs,” or (2) special facilities revenue bonds, supported by the credit of, typically, one or more airline(s), which are the principal user(s) of the facility. Historically, GARBs supported by the revenues of the airport have not been subject to default, i.e., failure to pay principal or interest when due. However, due to various U.S. and global events and economic trends, special facilities revenue bonds associated with facilities utilized by the airline industry are more often the subject of default; this is because an airline whose payment obligations support the payment of principal and interest on the bond may be unable to timely repay its obligations due to economic woes. Therefore, as fuel and labor costs continue to escalate in the U.S. domestic airline industry, the frequency of airline bankruptcies has increased; thus, it is likely that the incidence of special facilities bond defaults will continue to increase.
The financing of the construction of sports arenas has also included the securitization of sports arena revenue streams. In securitizations, generally the idea is to sell the revenue streams payable to the sponsor from highly creditworthy third parties. It is absolutely standard to use a special purpose entity to buy the assets and seek a financing of them independent of the sponsor (who usually has other debt and business/bankruptcy risk). The present inventor has been engaged in such financing, and has applied securitization techniques to isolate the revenue streams to be generated from teams playing at a new arena and use those revenue streams to obtain more favorable financing terms. Prior to that effort, sports facilities had been financed on the basis of their whole-revenue or mortgage of the facility, without isolating the best income streams.
What remains needed in the art, however, is a refinance methodology in which lease relationships are rearranged without the need to securitize anything.